Turning Point Brands’ 2026 Q2 Earnings Call: ALP Chain Rollout Delays, Manufacturing Timeline Shifts Clash

Date of Call: Aug 4, 2026

Financials Results

• Revenue: $143 million, up 23% year-over-year
• Gross Margin: 57% (adjusted gross profit as percent of sales)

Guidance:

• Raised full-year 2026 Modern Oral Growth Sales Guidance to $330-$350 million from $280-$300 million.
• Raised Net Sales Guidance to $260-$270 million from $210-$225 million.
• Maintaining full-year EBITDA Guidance of $70-$90 million, inclusive of increased nicotine pouch investments.
• Budgeted 2026 CapEx remains $4-$5 million, excluding projects related to modern oral.
• Expect to spend an additional $3-$5 million in 2026 in support of PMP applications.

Business Commentary:

Modern Oral Segment Growth:

• Turning Point Brands reported that Modern Oral gross and net sales increased by 149% and 128% year-over-year, respectively, and by 26% and 32% sequentially.
• This growth was driven by the expansion of retail distribution for both free and out, as well as the performance of direct-to-consumer platforms.

Stoker's Tobacco Performance:

• The Stoker's segment saw a 55% year-over-year increase in net sales, reaching $108 million, with modern oral nicotine pouch net sales increasing by 128%.
• The growth is attributed to the strong performance of the Stoker's Proud MST product and the continued shift in consumer preference towards premium products.

ZigZag Segment Stability:

• ZigZag segment net sales slightly decreased by 4% sequentially to $35 million, with adjusted gross profit maintaining at 57% of net sales.
• The stability was achieved through strategic brand engagement and awareness campaigns, despite anticipated declines in certain product lines.

Increased Investment in Sales and Marketing:

• The company experienced a 50% year-over-year decline in adjusted EBITDA, attributed to increased sales and marketing investments.
• This strategic investment is aimed at building durable brands and leveraging the growing demand in the modern oral category.

Domestic Manufacturing and Regulatory Progress:

• Turning Point Brands is on track to launch U.S. manufacturing by year-end, which is expected to reduce COGS and achieve gross margins of approximately 70% once fully scaled.
• The progress is supported by the ongoing PMTA application with the FDA, emphasizing the importance of regulatory approval for manufacturing expansion.

Sentiment Analysis:

Overall Tone: Positive

• Management stated, 'we delivered another quarter of strong execution in modern oral,' and 'we continue to believe we are in the early innings of a generational shift in nicotine consumption.' They also noted 'positive results,' 'strong growth,' and 'confidence in our ability to compete and win.'

Q&A:

• Question from Eric Delorier (Craig Hallam Capital Group): How are conversations with C-Store chains progressing, and is there potential for additional wins in the second half of this year?
  Response: Conversations with other chains will continue into the fall reset season, with strong expectations for new placements.

• Question from Eric Delorier (Craig Hallam Capital Group): What is the timing or outlook for potential domestic manufacturing?
  Response: Domestic manufacturing is tied to the PMTA process; the company is preparing to move quickly once there is a positive regulatory outlook.

• Question from Ian Zafino (Oppenheimer): Why is EBITDA roughly flat despite strong Modern Oral sales growth, and how will expenses leverage in the second half?
  Response: Increased sales and marketing investments to build durable brands are temporarily depressing earnings, but EBITDA is expected to grow over time.

• Question from Ian Zafino (Oppenheimer): What are the long-term gross profit savings from domestic manufacturing versus current setup?
  Response: Long-term gross profit potential with U.S. manufacturing is anticipated to be 70%.

• Question from Ian Zafino (Oppenheimer): What is the go-to-market strategy for international expansion?
  Response: The company uses local partners to handle regulatory and sales burdens; there are no plans to ramp up a sales force outside the U.S.

• Question from Aaron Gray (Alliance Global Partners): Was there any shipment timing impact in Q2 that could affect Q3 trends, and what is the momentum?
  Response: No shipment timing impact in Q2; growth is stable, with excitement about early retail results for new brands.

• Question from Aaron Gray (Alliance Global Partners): What is the anticipated promotional environment over the next 12 months?
  Response: The company aims to create a competitive environment by investing in shelf placement and brand equity, not intense promotions.

• Question from Gerald Pasquarelli (Needham): What is driving the lower contra revenue as a percentage of gross sales in the updated Modern Oral guidance?
  Response: Strong e-commerce sales, the addition of ALP (which has different gross-to-net dynamics), and increased reorders are tightening the spread.

• Question from Gerald Pasquarelli (Needham): Can you provide more color on the notable store gains in Q2 and where the brand is getting the most traction?
  Response: Field sales are currently focused on independent and regional chains; larger chain account conversations for ALP will begin in the fall reset period.

• Question from Nick Anderson (Roth Capital Partners LLC): Have slotting fee discussions changed given the velocity of your brands?
  Response: Slotting fee environment is expected to remain consistent; the company will apply learnings from Free sales to ALP negotiations.

• Question from Nick Anderson (Roth Capital Partners LLC): What does a competitor's MRTP designation mean for the modern oral category and your PMTA process?
  Response: Positive news for the category; it provides consumer information and the company remains focused on building brands and navigating the PMTA process.

Contradiction Point 1

Timing for Introducing ALP to Chain Accounts

Contradiction on the timeline for engaging large chain accounts with ALP, impacting market strategy and expansion expectations.

What are the key financial highlights from Needham's latest quarter? - Gerald Pasquarelli (Needham)

2026Q2: ALP will be brought into chain account conversations in the fall reset period (Q4) and into the spring. - [Summer](CCO)

What drove the notable gains in Q2, where is the brand seeing the most traction, and is there earlier-than-anticipated interest from large chains? - Eric Delorier (Craig Hallam Capital Group)

2026Q2: Strong conversations are anticipated in the fall, and ALP will be brought into these discussions at that time. - [Summer](CCO)

Contradiction Point 2

Gross-to-Net Spread Improvement Drivers

Contradiction on the primary driver for improved gross-to-net spread, shifting from a broad mix change to a specific new product channel, affecting financial outlook.

Gerald Pasquarelli (Needham) - Gerald Pasquarelli (Needham)

2026Q2: The improvement in the gross-to-net spread is driven by several factors: strong e-commerce sales... and the addition of ALP (which is initially sold in less intensive independent channels)... - [Graham Purdy](CEO)

What is driving the lower level of contra revenue as a percentage of gross sales in the updated Modern Oral guidance, and is it due to better in-store selling or distribution gains? - Gerald Pascarelli (Needham)

2026Q2: Several factors: 1) Strong e-commerce sales... 2) Introduction of ALP in the independent channel... and 3) Growth in reorders within chain accounts. - [Summer](CCO)

Contradiction Point 3

U.S. Manufacturing Timeline and Gross Profit Expectations

Contradiction on the timeline for U.S. manufacturing readiness and associated long-term gross profit potential, impacting strategic planning.

Eric Delorier (Craig Hallam Capital Group) - Eric Delorier (Craig Hallam Capital Group)

2026Q2: Infrastructure for U.S. manufacturing is in place... U.S. manufacturing launch on track for end of 2026, pending regulatory approval... Long-term gross profit potential with U.S. manufacturing is anticipated to reach 70% gross profit margins. - [Andrew Flynn](CFO)

What is the timing and outlook for potential domestic manufacturing, and is it tied to FDA approval or PMTA? - Ian Zaffino (Oppenheimer)

2026Q1: On Louisville, progress is good—infrastructure is laid, equipment is in place, and early machine throughput is promising. - [Graham Purdy](CEO)

Contradiction Point 4

Gross-to-Net Sales Spread Outlook

Contradiction on the drivers and outlook for the gross-to-net sales spread, affecting financial guidance and expectations.

Gerald Pasquarelli (Needham) - Gerald Pasquarelli (Needham)

2026Q2: Several factors: 1) Strong e-commerce sales... 2) Introduction of ALP in the independent channel... 3) Growth in reorders within chain accounts. Gross-to-net spread is tightening due to mix shift toward e-commerce and independent sales. - [Summer](Commercial/Go-to-Market Executive)

What is driving the lower level of contra revenue as a percentage of gross sales in the updated Modern Oral guidance, and is it due to better in-store selling or distribution gains? - Eric Des Lauriers (Craig-Hallum Capital Group)

2026Q1: Net sales pickup in Modern Oral is expected in the back half of the year. - [Andrew Flynn](CFO)

Contradiction Point 5

Store Count Growth Trajectory for New Products

Contradiction on the expected pace of new store wins for products, impacting market expansion strategy and investor outlook.

Eric Delorier (Craig Hallam Capital Group) - Eric Delorier (Craig Hallam Capital Group)

2026Q2: Conversations with large chains...will continue into the fall...Strong conversations are anticipated in the fall, with new placements expected over the next several quarters. - [Summer](CEO)

How are conversations with C-Store chains progressing, and is there potential for additional wins in the second half of this year or should we expect expansion gains more in the spring? - Ian Zaffino (Oppenheimer & Co.)

2025Q4: Store count growth is anticipated to look similar to the early days of the FRE launch...may be lumpy due to chain onboarding timelines. - [Graham Purdy](CEO)